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Technology has played an important role in the evolution of the start-up ecosystem in India. According to the latest KPMG report, the number of start-ups in the country has gone up from 7,000 in 2008 to 50,000 in 2018. This rising numbers have been widely recognised as an important engine for growth and jobs. Through innovation and scalable technology, start-ups can generate impactful solutions and act as vehicles for socio-economic development and transformation.

Rise of tech start-ups

According to the latest NASSCOM report, the total number of tech start-ups in the country has grown to 9,300. Also, India witnessed the addition of seven unicorns (companies with valuation of over $1 billion) this year, till August, taking the total tally to 24 - the third highest number of unicorns in a single country. The NASSCOM report stated that start-ups have created an estimated 60,000 direct jobs and 1.3 to 1.8 lakh indirect jobs.

The report further stated that over 18% of all start-ups in India are now leveraging deep-tech, which accounts for over 1,600 such companies in India. This number constituted only 8% of start-ups incepted in 2014, and has seen a 40% compound annual growth rate over the past five years.

Harsh Vardhan Mahipal, Founder, TaxiTop Media, a start-up that deals with transit advertising told BE, “Whatever technological innovations we talk about are basically the enhancement of the technologies as the market is already there and they have been functioning traditionally for a long time. It is technological improvisations that the new tech companies are working on to take their businesses forward.”

Over the last few decades, technological change has reduced the cost of building digital products and has provided access to consumer markets. Due to improved digital connectivity, market access barriers have been brought down. The broadband penetration is increasing rapidly and the number of wire line subscribers in 2018 was expected to increase by 44% over the next four years. The number of internet users was pegged at 483 million in 2018 and is projected to reach 666.4 million in 2025. In addition, the government initiative, “Digital Saksharta Abhiyaan”, was started to promote digital literacy and help people become more knowledgeable about the digital world.

According to industry insiders, start-ups rely on market access as well as possibilities to identify and charge customers. Establishing someone’s identity is grit in the wheels of commerce. As the means for identity verification and digital payments have become more widely available in recent years, start-ups can serve legions of new customers.

Challenges

While speaking on the technological limitations faced in India, Mahipal said that India lacks a proper infrastructure for hardware manufacturing and procurement which can be a problem for the hardware technology companies. He said, “There is no hardware industry for LED display which is very prominent in India so we have to import all our components from China.”

There are also certain challenges on the adoption of software technology. Sumit Sharma, Co-Founder, GoBOLT, a technology driven end-to-end logistics service provider told BE, “We have an innovative model of engaging with the small freight operators and leveraging the marketplace for transportation. Initially, getting transporters on board was the biggest challenge, as this is a very fragmented market with heavy broker reliance.”  He also added that technology adaptation posed a big challenge, both on the vendor and customer side.

Future trends

According to industry insiders, despite the limitations, the start-up industry may expect an implementation of blockchain across sectors.  Artificial Intelligence (AI) may evolve from narrow AI to broad AI and India can be a market for testing innovations.

Sharma stated, “The time it takes for a new age technology to reach mainstream adoption is accelerating exponentially, to the point where in the future, a new technology can have greater than 50% market penetration.”

The NASSCOM report says that investment in start-ups were steady with $4.4 billion flowing in between January-September, 2019 across 450 start-ups – up by 5%. Funding saw a huge spike in early stages with $1.6 billion being recorded and growing at 70%.

Speaking about the prospect of the tech start-ups in India, Mahipal said, “The tech companies which have come up in the last 10-15 years have added millions of dollars to the economy. So, the opportunities for start-ups are immense in a country like India.” He added that there are certain problems which are very local in India and tech start-ups can address these problems and create a market for themselves.